Strong US labor market data took some bullish momentum out of gold ahead of the weekend. However, according to some analysts, increasing turmoil in the US banking sector will continue to provide solid support for gold prices. Moreover, it is possible that this turmoil may keep the downtrend at bay.
Gold prices may fall further, but…
The U.S. Bureau of Labor Statistics reported 353,000 jobs in January. This significantly exceeded expectations. At the same time, wages increased by 0.6%. This has contributed to the ongoing threat of inflation in the economy. Gold prices fell as markets saw less than a 20% chance of a Fed rate cut next month. Interest rate cut expectations in May were also lowered. Markets are falling in line with comments from Federal Reserve Chairman Jerome Powell, who said Wednesday that while the central bank is preparing to begin easing this year, the timing remains uncertain. Despite the sell-off due to increasing headwinds, the market has managed to maintain critical support levels. It closed the week in positive territory. Phillip Streible, chief market strategist at Blue Line Futures, makes the following assessment:
Seeing gold’s price action this week is a solid reason to be bullish on gold and look for buying opportunities. I’m starting to dip my toe into the market. Prices may fall further, but that’s where you look for buying opportunities.
There will probably be a drop next week!
But not all analysts see potential for gold. Adam Button, chief currency strategist at Forexlive.com, says he is neutral on the market. He also expects to see lower prices in the near term as seasonal factors begin to dry up. Traditionally, January is a seasonally strong period for gold. cryptokoin.comAs you can follow from , prices increased by an average of 1.79% at the beginning of the year. This year, there was a 0.2% decrease in prices. Button comments:
Gold has faced plenty of headwinds so far this year. But seasonal purchases helped it withstand these pressures. But what happens when this season’s recruiting starts to dry up? I think we should expect gold prices to fall in the next few weeks. I think for now you should sit back and wait for a new buying opportunity.
Button adds that in any other month, gold’s price action and its ability to hold critical support would be considered a key bullish factor.
There’s no point in starting a rally until all the ducks are in a row!
Ole Hansen, head of commodity strategy at Saxo Bank, says none of the events of the past week have affected the long-term bullish outlook. Hansen adds that he continues to see further consolidation in the market. Based on this, the analyst makes the following statement:
Gold will remain stuck in the short term until we have a better understanding of the timing, pace and depth of future US and EU rate cuts. The market may occasionally get ahead of itself until the first cut occurs, and in the process, it may raise interest rate cut expectations to levels that leave prices vulnerable to a correction. With this in mind, gold’s short-term direction will continue to be determined by incoming economic data and their impact on the dollar, yields and, at the very least, rate cut expectations. There’s no point in starting a rally until all the ducks are in a row. They also appear to be scattered all over the place once again, following another strong US jobs report.
A new banking crisis could start a gold rally!
Analysts remain cautious about gold in the near term. However, there is not much of a downtrend. Phillip Streible says any negative banking headlines will send gold prices soaring.
Adam Button says he would look to buy gold if he sees growing evidence of widespread banking losses. “This is a legitimate threat to financial markets,” the analyst said. Someone is holding this bad debt. Besides, it’s only a matter of time before they have to write them down. “We don’t know how long banks can keep these losses.” says.
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